Tax Breaks for Homeowners

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While there are many opportunities to create financial wealth and safety in America, few are as powerful as owning a home. Even with decades of mortgage payments, the relative size of those payments usually declines over time as wages rise but the payments stay flat. Also, home values tend to go up over time, representing another way to secure wealth in a home.

Once a mortgage is paid off, families own their own homes and just have to pay taxes and maintenance, seriously freeing their regular income from one of life’s biggest expenses. The advantages don’t stop there. Multiple law enforcement agencies and municipal governments have learned that crime goes way down in communities where at least a third of the residents own their homes as compared to renting.

Buying a home isn’t cheap. In fact, it’s often the biggest single expense most families will make in their lifetimes. Fortunately, there are many tax breaks homeowners can use to make things more affordable.

  1. Capital Gains: If you sell your home and profit from it, then capital gains taxes might apply. However, if it was your primary residence, you might be able to keep capital gains without them getting taxed.
  2. Discount Points: When you get a mortgage, you might get to buy discount points that lower the interest rate applied to the loan. Points you buy to lower the interest rate are tax-deductible.
  3. Home Equity Loan Interest: This is just like having a second mortgage. You can deduct the interest you pay on a home equity loan if you took the funds for home improvements.
  4. Home Office Costs: The actual details are up to the IRS on this one, but home office space might get you tax breaks.
  5. Mortgage Insurance: Also known as PMI or private mortgage insurance, it’s there to give your lender protection if you can’t keep up with mortgage payments. You can itemize the cost of this insurance.
  6. Mortgage Interest: The mortgage interest deduction lets you lower taxable income if you do an itemized deduction.
  7. Necessary Improvements: The scope of what is ‘necessary’ is up to the IRS, unfortunately, but certain improvements can qualify as tax deductions.
  8. Property Taxes: These are often applied at the state and municipal levels. Depending on how you file, you can deduct $5,000 to $10,000 from your federal taxes.

The 3 Best Personal Finance Software Options for 2017

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Personal finance software can assist you in managing your finances. The software tracks your transactions and warns you about potential problems. Personal finance software organizes your finances daily, which allows you to relax and avoid stress. Here are the best available personal finance software programs

YNAB

The acronym YNAB stands for You Need A Budget, and the software is designed to help people who are budgeting. YNAB wants users to take every dollar that they earn and give that dollar a job. Users can find out exactly what every spent dollar went towards. YNAB can help you manage your immediate expenses; such as mortgage or rent, as well as your discretionary expenses; such as dining out. YNAB is a good choice for people who have constant expenses.

YNAB only allows you to budget money that you have actually earned, which forces you to plan around the money you presently have and not the money that you’ll receive in the future. YNAB will stop you from overspending by taking money out of another category to cover costs. YNAB encourages people to think of any extra money as finances that can help future expenses. By helping users put money aside for future expenses, YNAB believes that it is enhancing the financial security of its users. YNAB offers free webinars to help people understand how the software works.

Mint

One of Mint’s most popular features is its easy setup. The dashboard makes everything clear, so users can easily transition from one column to the next one. Mint recognizes that most people have flexible budgets, so users can set up a budget that makes sense with their expenses. Mint’s budgeting system allows users to make different categories for every expense that you have. Once you have paid for all of your expenses, the rest of your income goes into a category known as Everything Else.

Mint’s budgeting system lets users clarify when the expense will be due, so you can budget every month until the expense is due. You can set aside money every month to help plan for any long-term financial goals. That money will be taken out of your available budget.

Personal Capital

Personal Capital looks at the total net worth of its users through calculating all of their current assets and then subtracting any liabilities. Personal Capital lets users compare their spending during the current month to spending in previous months. Personal Capital shows users how their investments are doing by giving them a breakdown of their individual stocks, as well as an index of any money that has been accumulated or lost. You can seek a breakdown of your finances in both real dollars and percentages.